Tariffs could be major blow to bike industry [document]

Tariffs could be major blow to bike industry [document]

August 19th, 2018 by Mark Pace in Local Regional News

Erik Peterson assembles a bicycle in the bike shop at the new REI store in the Waterside shopping center on Friday, May 11, 2018, in Chattanooga, Tenn.

Photo by Doug Strickland /Times Free Press.

Document: PROJECTED BURDEN

The projected tariff burden for bicycles and parts from the United States International Trade Commission website. Chart provided by People for Bikes.

Proposed tariffs could be a fatal blow for some local bike shops and lead to higher prices for consumers in an industry that already suffers from razor-thin margins, but proponents believe the import taxes are necessary for the U.S. to regain a foothold in the global economy.

The Trump administration proposed tariffs up to 25 percent on roughly $16 billion worth of imports earlier this month, an estimate advocacy groups say could cost the American bike industry $250 million. The tariffs will impact more than a dozen bike parts, ranging from frames and wheels to chains and pedals.

"It's a big risk, and it's a big threat," People for Bikes Director of State and Local Policy Alex Logemann said. "Simple economics indicates that when price goes up, demand goes down. The bike industry isn't going to cease to exist or anything like that, but it could impact sales for those on the margins. In an industry that operates on reasonably thin margins, it could be the line between profitability and not being profitable."

Most bikes — and nearly all bicycle components — are manufactured overseas. People for Bikes, a national bike advocacy group, fears the tariffs will force some local shops to close and others to pass the added cost on to customers. The group has contacted bike shop owners, asking them to send public comments to the Office of the United States Trade Representative denouncing the proposed tariffs.

Federal trade officials aren't singling out the bike industry, Logemann said, but rather have an algorithm that proposes price increases on certain items to meet larger goals in an escalating trade war. Since the bike industry imports most of its goods, it's an easy target, he said.

Local bike shop Cycle Sport has been monitoring the proposed tariffs. The shop is doing fine financially, salesman Kim Morris said, but he is worried what such a price increase will do to the industry.

"As a recreational shop, cost is a variable and you have to watch every penny," Morris said. "We're concerned about whether we can and should pass costs onto customers. We're sort of the last stop, so if costs rise, it affects us."

However, there are others who argue the tariffs are necessary. Daniel McCarthy, editor at large of The American Conservative magazine, said tariffs are necessary to ensure the strength of the American market, which isn't as stable as it seems, he said. He believes there needs to be a shift in the American economy from a service-based economy to one that sells and produces goods.

While price hikes will hurt businesses in the short term, they are necessary to reset the market, he said, and would likely eventually come with or without tariffs.

"The price of Chinese goods is artificially low as a result of Beijing policies, as a result of state-supported industry, and basically the protections China imposes on its own market," he said. "As a result of this, U.S. steel and aluminum users, like the bike industry for example, are getting the components they need at a lower price than the market would naturally provide. While that would seem like a good thing in the short run, in the long run, once China has driven U.S. competition out of the market it's in a position to raise prices."

Contact staff writer Mark Pace at mpace@timesfreepress.com or 423-757-6659. Follow him on Twitter @themarkpace and on Facebook at ChattanoogaOutdoorsTFP.


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